I. Legal basis

• Decree No. 39/2007/NDCP
• Circular 111/2013/TT-BTC
• Circular 80/2021/TT-BTC

II. WHAT IS A SERVICE CONTRACT WITH AN INDIVIDUAL?

A service contract with an individual is a legal agreement between an individual providing a service and an individual or organization hiring that service. This contract clearly stipulates the terms related to the performance of the service, such as: Service content; Implementation time; Remuneration; Responsibilities and obligations; Contract termination terms; Confidentiality and intellectual property…

III. LEGALITY WHEN SIGNING SERVICE CONTRACTS WITH INDIVIDUALS

According to Article 3, Decree No. 39/2007/NDCP stipulates on individuals engaged in commercial activities: “Individuals engaged in commercial activities are individuals who personally carry out one, some or all of the activities permitted by law on the purchase and sale of goods, provision of services and other profit-making activities on a daily basis but are not subject to business registration under the provisions of the law on business registration and are not called “traders” under the provisions of the Law on Commerce.”

And according to Article 5, Decree No. 39/2007/NDCP clearly states the scope of goods and business services of individuals engaged in commercial activities as follows:

1. Individuals engaged in commercial activities are permitted to trade in goods and services in accordance with the provisions of law, except for the following goods and services:

• Goods and services on the List of goods and services prohibited from trading in accordance with the provisions of law;
• Smuggled goods, counterfeit goods, goods of unknown origin, goods past their expiry date, goods that do not ensure food hygiene and safety conditions in accordance with the provisions of law; goods that do not ensure quality, including degraded goods, poor quality goods, toxic goods and animals and plants affected by epidemics;
• Goods and services on the List of goods and services restricted from trading in accordance with the provisions of law.

2. In the case of trading in goods and services on the List of goods and services subject to conditional trading, individuals engaged in commercial activities must comply with the provisions of law related to the trading of these goods and services.
3. Individuals engaged in commercial activities must comply with the laws on taxes, prices, fees and charges related to goods and business services. In the case of food and catering business, individuals engaged in commercial activities must ensure that they meet all conditions prescribed by the law on food hygiene and safety for the business of this type of goods and services.

Thus, when signing a service contract with an individual, that individual must meet all the conditions of an individual engaged in commercial activities as well as fully perform obligations to state agencies.

IV. IS A SERVICE CONTRACT WITH AN INDIVIDUAL SUBJECT TO TAX DEDUCTION?

According to Article 25, Circular 111/2013/TT-BTC states:

Organizations and individuals paying wages, remuneration, and other payments to individuals residing without a labor contract (according to the instructions in Point c, d, Clause 2, Article 2 of this Circular) or signing a labor contract of less than three (03) months with a total income payment of two million (2,000,000) VND/time or more must deduct tax at a rate of 10% on the income before paying to the individual.

In the case where an individual has only one income subject to tax deduction at the above rate but the estimated total taxable income of the individual after deducting family circumstances is not yet at the level of tax payable, the individual with income shall make a commitment (according to the form issued with the guidance document on tax management) to the income-paying organization so that the income-paying organization can temporarily not deduct personal income tax.

Based on the commitment of the income recipient, the organization paying the income does not deduct tax. At the end of the tax year, the organization paying the income must still compile the list and income of individuals who have not reached the tax deduction level (on the form issued with the guidance document on tax management) and submit it to the tax authority. The individual making the commitment must be responsible for his/her commitment. In case of detecting fraud, he/she will be handled according to the provisions of the Law on Tax Management.

Individuals making the commitment according to the instructions in this point must register for tax and have a tax code at the time of commitment.

So according to this regulation, Organizations and individuals paying income to resident individuals must deduct personal income tax at a rate of 10% before payment when the total payment is from 2,000,000/time.

However, if an individual estimates that their total taxable income does not reach the taxable level, they can make a commitment to the income-paying organization to temporarily not deduct tax according to Form 08/CK-TNCN issued with Circular 80/2021/TT-BTC. The organization will not deduct tax if there is a valid commitment, but must still summarize and report to the tax authority. The individual must register for tax and have a tax code when making the commitment, and is responsible for that commitment. If fraud is detected, it will be handled according to the Law on Tax Administration.

V. About Us, Hankuk Law Firm

■ Hankuk Law Firm – Introduction

The goal of the legal services provided by HANKUK LAW FIRM is to support businesses, investors, and people. Our organization employs skilled Korean lawyers, partners, and professionals to provide legal services to businesses related to corporations and litigation.

To support the startup process, our lawyers and staff provide a wide range of services, including business law consulting, tax and immigration law consulting, real estate services, business consulting, marketing and communications, human resources, product distribution, franchise options, etc. We provide expert advice on every aspect of your business needs.

To protect the legitimate rights and interests of our clients and achieve the best results, we provide legal advice and participate in civil lawsuits related to business, labor, marriage, family, and inheritance.

■ Contact us now

For reliable and effective legal advice, please contact HANKUK LAW FIRM now. We are committed to providing you with the best possible answers and our team of experienced lawyers has extensive knowledge in many legal fields. We are always here to provide the most competent and dedicated support, whether you are dealing with contractual issues, commercial disputes or need guidance on foreign investment. HANKUK LAW FIRM is honored to have assisted hundreds of domestic and international clients in skillfully resolving complex legal issues as their trusted legal partner. Do not let legal issues hinder your success. Let us accompany you towards legal achievement and comfort. For prompt guidance and support to ensure your rights are always maintained at the highest standards, contact HANKUK LAW FIRM now.

■ Contact Hankuk Law Firm:

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